At StockOpine, our primary objective is to own high-quality winners for the long term within a focused portfolio of roughly 20 companies. This number isn’t arbitrary. It’s based in academic research by Elton and Gruber (1977), who showed that a randomly selected portfolio of about 20 to 30 stocks eliminates most unsystematic (company-specific) risk.

According to their findings, a 20 stock portfolio carries total risk only about 28% above the minimum achievable level (a stock portfolio with 3,290 securities). That gap narrows to roughly 20% with 28 securities and about 10% with 60 securities. The takeaway is that the marginal benefits of diversification decline rapidly, while the effort and cost required to monitor additional holdings increase significantly.

However, position sizing is not an exact science. It is a continuous balance between conviction and humility. The recent market swings have prompted us to re-examine our rationale, acknowledge its limitations, and consider where increased flexibility might offer an edge.

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1. Why Sizing Matters

Before diving into our rules, it is important to understand why we don’t just buy an index or stick rigidly to one factor. Investment styles tend to move in cycles, alternating between extended phases of outperformance and underperformance.

As illustrated by the Koyfin charts below showing various factor ETFs against the S&P 500 (SPY) over 10-year, 5-year, and 1-year horizons, no single strategy wins all the time. Growth dominates over the decade, but value and momentum have their distinct periods to shine. Because the market tide shifts, picking the right winners and managing their weight in the portfolio is important.

10-Year Horizon

Over the last decade, Growth (IWF) has significantly outperformed, while small-caps and value have lagged.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

5-Year Horizon

The 5-year view shows more variance, with recent dips in growth bringing it closer to the average.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

1-Year Horizon

In the short term, the picture is messy. Different factors fight for outperformance, highlighting the difficulty of relying solely on broad factor exposure.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

Given this variability, here is how we currently approach sizing, and how we are thinking about evolving it.

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2. The Initial Entry: Conviction Vs Bias

When we complete our analysis on a new company, we typically aim for a starting position of 3% to 5%. This depends on our conviction level derived from financial metrics (growth, earnings quality, ROIC), Total Addressable Market (TAM), management quality, and valuation.

• If a company is a clear quality compounder, we start with at least 3%.

• For turnover stories or mean reversion expectations, where the range of outcomes is wider, we start lower. (e.g., we started Leslie’s at 2%, and unfortunately, even adding 1% later proved to be a poor decision).

Additionally, we apply a ‘cooling-off period’ after deep research to counteract recency bias (the tendency to be overly optimistic just because you just spent hours studying the bull case). Starting at 3% allows us to have ‘skin in the game’ while reserving the right to watch an earnings call or two to confirm our thesis before scaling up.

3. Managing the Position: Adding on Weakness and Strength

Once a stock is in the portfolio, fundamentals and price action impact our next moves, but only within strict limits.

Adding on Weakness (but aiming to avoid the “Falling Knife”): If a high-conviction company’s stock price falls due to short-term issues, we are attracted to buying more. However, we have a theoretical limit that a single position should not exceed 8-10%* of invested capital at cost. At some point, you have to step back. This prevents catastrophic losses if the thesis is fundamentally broken and we were wrong.

*Exceptions: Mega-cap compounders like Google and Amazon have historically held very high weights in our portfolio because they earned this right through sustained, proven execution.

Adding on Strength: We are also willing to average up (as we did with Booking, Alphabet, and Amazon). If a company’s execution and economic moat prove stronger than our initial expectations, we will add to the position even if the share price has increased. That said, once a holding exceeds 10% of the portfolio, we typically stop adding and allow it to run, provided the fundamentals remain intact.

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4. The Art of Selling: Why We Might Trim Instead of Exit

Selling is harder than buying. We focus on clear red flags: a thesis that deteriorates over a two-year period, weak communication (withdrawing guidance, repeated overpromising), or chronic operational underperformance. These were the reasons we exited positions such as Diageo, Lululemon, Reckitt, and Rentokil.

That said, not every setback warrants a sale. We try to distinguish between structural and temporary factors. For example, we held Evolution through EU regulatory fencing issues and Asia cyberattacks, and Greggs during its heavy investment phase. Short-term noise is different from long-term erosion.

We have also learned that selling purely on valuation can be costly. We bought KLA around $300 in 2022 and sold near $900 in 2025 because it appeared expensive. Today, it trades close to $1,500.

The data supports this lesson. A 2018 study by Professor Hendrik Bessembinder found that just 4.3% of U.S. listed companies (top 1,092 firms) from 1926 to 2016 generated 100% of net wealth creation above Treasury bills. The remaining ~96% collectively matched the return of risk-free bonds (9,579 firms (37.81%) generated positive lifetime wealth, but their gains were fully offset by the wealth destruction of the remaining 14,661 firms (57.88%)).

Source: Do Stocks Outperform Treasury bills? - Hendrik Bessembinder - May 2018

Therefore, fully exiting a high-quality compounder because the valuation feels stretched risks eliminating one of the rare companies that drives long-term portfolio returns. That’s why we now prefer trimming over full exits.

When AMD quickly grew from a 5% to 8% position, we reduced exposure to manage risk but retained a core 5% holding to participate in the AI upside. Trimming protects capital; maintaining a core position preserves asymmetry.

5. Future Evolution: The Case for Flexibility (The Peter Lynch Approach)

Sticking rigidly to 20 stocks means that to add a new idea, an existing one must be sold. This can lead to passing on a great new idea just to avoid cutting a solid existing holding.

We are considering an approach similar to that used by Peter Lynch. While managing the Fidelity Magellan Fund from 1977 to 1990, Lynch delivered a 29.2% annualized return. At times, he held hundreds, even over 1,000 stocks. Many of these were very small positions, often initiated to monitor a company more closely, with capital scaled up only as conviction strengthened and the thesis proved correct.

We see value in being flexible enough to expand our holdings to 25 or even 30 companies by introducing smaller “starter” positions (e.g., 1.5%). Why? Because we missed meaningful opportunities in stocks like Micron (pitched at $117, now $418) and Teradyne (pitched at $69, now $329) simply because the portfolio felt “full.”

A 1.5% starter position creates optionality. If the thesis proves wrong, the impact on the portfolio is limited and easily absorbed. If it develops into the next Micron, that small initial allocation can meaningfully enhance overall returns.

This framework acknowledges that we won’t get everything right, but it also ensures we don’t exclude the next great compounder due to artificial capacity constraints.

Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

• What worked, what didn’t, and what we learned at StockOpine

• Portfolio performance: returns, benchmark comparison, and key quantitative metrics

• Portfolio components, activity and attribution (Q4’25): buys, sells, winners, and losers (paid only)

• What we are watching next year (paid only)

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1. StockOpine Newsletter

We started the year with around 9,100 subscribers and today stand at roughly 7,800. At first glance, that looks like a step backwards. It wasn’t.

In July, we removed more than 1,600 inactive subscribers to ensure the community remains genuinely engaged with the content we publish. The outcome was better email deliverability and a materially higher open rate. At the same time, Substack followers grew from ~12,500 to ~17,000, while engagement on posts and Notes continued to improve. Fewer subscribers, but better ones.

During the year, we shared a wide range of stock ideas. Some aged extremely well. Teradyne and Micron are up roughly 226% and 187%, respectively, since publication. We also went deep into AI-related companies such as AMD (up ~99% since publication) and ASML, cybersecurity names like Fortinet, and software businesses including HubSpot and Intuit (see the Deep Dive section for the full list).

What you engaged with the most was our ASML Deep Dive, and for good reason as the stock is up around 80% since publication. Other strong engagement came from our coverage of Invisio, a small-cap defense company, our valuation update on Evolution (where we continue to believe the company is undervalued), and our Alphabet valuation update in early June. At a time when panic was widespread, we outlined three scenarios and concluded that selling was the wrong decision. Since then, Alphabet is up roughly 100%.

As part of our core Deep Dive offering, we expanded the format to include valuation updates and Portfolio News, a weekly overview of what’s moving our holdings. In December, we also started making our valuation models available to premium members, with the latest one covering Grab.

On mistakes, two stand out.

The first was Lululemon. We held the position longer than we should have, hoping product newness would revive US sales and justify the valuation, while leaning on international growth as a hedge. That never materialised. Instead, we heard repeated excuses from management, and we eventually exited. It remains a great brand, but consumer discretionary exposure can quickly erode returns when fundamentals fail to catch up with valuation. There’s renewed interest now, with increased activist involvement and the stepping down of Calvin McDonald, but this was still a miss on our side.

The second, and much worse, was Leslie’s, our poorest investment decision of 2025. We looked for a turnaround in a heavily indebted business, hoping for a market recovery. The real mistake was doubling down after the stock fell. Sometimes the right move is to pause and ask what the market is telling you. Instead of sticking with PoolCorp, a high-quality compounder with strong economics (ROIC above 17%, ROE near 29%, gross margins around 30%, operating margins near 11%), we chased upside in a low-quality business. With higher risk doesn’t just come higher returns; it also brings permanent capital loss. Leslie’s had no quality metrics, and it didn’t fit our strategy. That’s on us.

But that’s investing. You get calls right, you get others wrong. The only option is to keep learning and improving.

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2. Portfolio Performance

As of December 31, 2025, the portfolio returned +3.8% in Q4, outperforming the S&P 500 by 110 bps (index: +2.7%).

For the full year 2025, performance lagged the benchmark meaningfully (+5.1% vs. +17.9%). The underperformance was driven primarily by the mistakes discussed above, alongside flat performance from Meta and weaker than expected contributions from PayPal and other holdings. We will break this down in more detail later in the article.

Since inception (January 28, 2022), the portfolio has delivered a +53.2% cumulative return, equivalent to ~11.5% annualized. Over the same period, the S&P 500 returned +63.8%.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

Portfolio Insights

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

From a quality perspective, the portfolio remains well balanced and comfortably above our internal thresholds. ROIC stands at 23.4%, broadly in line with the S&P 500 at 23.3%, while EBIT margins of 25.6% remain well above our minimum accepted level. The modest quarter-over-quarter drop in ROIC was largely driven by recent portfolio changes rather than deterioration in underlying business quality.

One of the new additions, Grab, currently carries a near-zero ROIC, which diluted headline quality metrics. However, this was offset by a meaningful improvement in the portfolio’s expected EPS growth, now 16.4%, up roughly 240 bps versus the prior quarter. This reflects our willingness to accept short-term pressure on quality when medium-term earnings growth improves materially (ROIC will eventually catch up).

While quality metrics are broadly in line with the index, valuation metrics are strong. The portfolio trades on a free cash flow yield of 4.2%, compared with 2.4% for the S&P 500, and offers ~20% weighted analyst upside versus ~13.5% for the index. Taken together, the portfolio combines quality with more attractive valuation and forward return potential.

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Attribution: What Drove Returns This Quarter

As of January 16, 2026, the portfolio consists of 20 holdings.

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These are serious questions we don’t take lightly, especially since we’ve committed to sharing our performance transparently. But this is exactly where conviction matters.

The question is: Are we here to chase what’s working now or to build wealth steadily by owning businesses we would be comfortable holding for decades?

With that mindset, we reviewed our portfolio closely this quarter and we closed two positions and added three new ones. Each move has strengthened our portfolio fundamentals and reinforced our confidence in the long-term trajectory.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

That said, periods of underperformance don’t mean we are not finding great ideas. Quite the opposite.

• Our August idea, Micron, has surged from $117 to over $200 (+75% in two months).

• Our April one, Teradyne, moved from $69.8 to $139 (+99%).

• Our AMD deep dive in March (buy at ~$100, now +140%) and June analysis on Google (then $166, up +50%) are proof that deep research pays off.

At StockOpine, our goal isn’t to predict every quarter but it’s to help you understand businesses deeply and make informed, long-term decisions. Whether you use our analysis to shape your own portfolio or view our portfolio directly on eToro*, our commitment remains the same: clarity, quality, and conviction.

(*eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.)

Now, let’s dive in. But first, here’s a quick recap of the deep dives we shared this quarter, in case you missed any!

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Deep Dives

1. Portfolio Performance

As of September 30, 2025, our portfolio returned +2.4% in Q3, underperforming the S&P 500 by 580 bps (index: +8.1%). Year to date, we are trailing the benchmark (+1.2% vs. +14.8%).

Since inception (January 28, 2022), our portfolio has delivered a +47.4% cumulative return (+11.1% annualized), compared with the S&P 500’s +59.5% over the same period.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

2. Portfolio Insights

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

Our portfolio continues to meet the minimum quality thresholds we’ve set, showing improvement across all key metrics compared to Q2 2025. ROIC improvement is notable, as two of our new positions have ROICs above 40%, driving the average higher. In terms of valuation, the increase in EV/EBITDA may appear negative at first glance, but free cash flow yield remains stable, and analyst target prices have risen from the prior quarter.

When compared to the S&P 500, our portfolio trails slightly in profitability (26.9% vs. 27.3%) and revenue/EPS growth (11.8% and 15.9%, respectively). However, it now has a higher ROIC of 24.6% vs. 23.8%. From a valuation standpoint, our portfolio has a 4.1% free cash flow yield versus 2.5% for the index and trades at an EV/EBITDA multiple of 20.2x, roughly 15% below the S&P 500. At the same time analysts’ expect higher upside of 15.7% vs. 10.4% for the index.

All in all, we hold businesses well-positioned for long-term value creation.

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Winners and losers

As of September 30, 2025, the portfolio consists of 20 stocks,

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On June 24th, however, we made a deliberate adjustment: exiting one position and entering another that appeared deeply undervalued. As Q3 began, we also initiated a stake in a high-quality compounder and topped up a stock we believe has been unfairly beaten down. We’ll elaborate on these moves shortly.

These trades are part of our ongoing effort to refine the portfolio’s risk/reward profile and ultimately, compound outperformance over time.

Before diving into the Q2 2025 Portfolio Update, here’s a quick recap of the long-form articles and stock ideas we shared this quarter, in case you missed anything!

Stock ideas

Deep Dives

1. Tariffs - still in play

Uncertainty around tariffs continues, and trying to predict the outcome seems futile given the recent moves (letters to Japan, South Korea) and the pause extension from July 9 to August 1. The Vietnam agreement is a positive, 20% tariffs on most exports, 40% on transshipped goods, but China remains the big unknown.

With that, let’s move on to performance, portfolio insights and the rationale behind this quarter’s moves.

2. Portfolio Performance

As of June 30, 2025, our Q2 return was +13.6%, outperforming the S&P 500 by 270bps (10.9%). While we’re still trailing the index YTD (-1.2% vs. +6.2%), largely due to a tough Q1, our worst since StockOpine began, we’re encouraged by the strong rebound this quarter.

Since inception (Jan 28, 2022), our portfolio has delivered a cumulative return of +44.0% (annualized +11.3%), versus the S&P 500’s +47.5% (annualized +12.0%). We're narrowing the gap, and we believe the recent portfolio additions position us well to outperform over the long term.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

3. Portfolio Insights

We recently introduced the following metrics to help evaluate the quality of our holdings and identify underperformers. You can refer to this article for the rationale of using each metric.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

Our portfolio continues to meet the minimum quality thresholds we’ve set, though there’s been some minor deterioration in valuation metrics compared to the previous quarter. On the positive side, return on invested capital (ROIC) improved by 40bps.

When stacked against the S&P 500, our portfolio currently lags in headline metrics like profitability (25.9% vs. 26.9% for the index), ROIC (21.4% vs. 23.2%), and revenue/EPS growth (9.2% and 12.7%, respectively). But we’re not concerned. These figures still reflect a high-quality portfolio, and we believe the businesses we hold are well-positioned for long-term compounding.

What gives us even more confidence is the relative upside potential: our portfolio has a 4.1% free cash flow yield versus 2.7% for the index, and trades at an EV/EBITDA multiple of 18.2x which is about 18% lower than the index.

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This quarter, we went a step further by introducing a simple scoring system to give a quick snapshot of each holding’s quality, purely based on four key financial metrics:

• EBIT margin for profitability

• ROIC for capital efficiency

• 5-year EPS CAGR for growth, and

• FCF/EV yield for valuation

Each metric is scored on a scale:

• 0 if the result is below 70% of our threshold

• 0.5 at 70%

• 1.0 at 100%

• 1.5 if it exceeds 130% (and capped there)

This doesn’t capture everything, especially intangible factors like brand strength, leadership quality, or companies in transformation phases. But it's a useful starting point for spotting strengths and weaknesses at a glance.

It’s not the full picture, just a lens to begin with.

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That was our experience in 2022 and 2023. However, 2024 told a different story. The primary driver of our underperformance wasn’t what we owned, it was what we didn’t own (i.e. and ). And then came 2025.

The first quarter under Trump has been nothing short of a “disaster” for both the stock market and our portfolio, and it continues to be challenging. But the real question is this: Should we be concerned, given our long-term investment horizon? Or is this simply business as usual, with the market handing us an opportunity to reposition for future gains?

Well, on March 14th, we made some decisions, reducing our holdings from 23 to 19 so as to reallocate capital towards stocks where we see greater upside potential.

After all, this quote says it all:

“A down market lets you buy more shares in great companies at favourable prices. If you know what you’re doing, you’ll make most of your money from these periods. You just won’t realise it until much later.” Shelby Davis

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Before we jump into the Q1 2025 Portfolio Update, a few notes to help you get the most out of StockOpine:

📬 Some emails have landed in spam, please check your folder and mark us as “Not Spam” to stay in the loop.

🚀 We revamped our premium tier in early 2025. Check the guide here!

📄 Not sure yet? Read our Adyen deep dive to get a feel for the quality of our research before subscribing.

With that said, here’s a quick recap of the long-form articles and the stock ideas we published this quarter, just in case you missed any!

1. Carrier Global: Is This HVAC Leader Still a Buy?

2. AMD Deep Dive: From Underdog to AI & Data Center Contender

3. Beyond Firewalls: Fortinet’s Vision for Cyber Dominance (Part 1)

4. Beyond Firewalls: Fortinet’s Vision for Cyber Dominance (Part 2)

5. 2025 February Stock Idea

6. 2025 March Stock Idea

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1. Tariffs is all that matters

In February 2025, President Trump reignited global trade tensions by announcing tariffs on countries like China, Canada, Mexico etc. and by April 2nd (what Trump called the ‘Liberation Day’) a universal 10% minimum tariff on all US imports and increased reciprocal tariffs to 57 more countries. Just days later, on April 9th, he backed-down with a 90-day pause and scaled tariffs back to 10% for countries that hadn’t retaliated.

This chaotic trade policy has created uncertainty for investors and added strain for consumers. The S&P 500 is down over 11% since February, while households are bracing for higher prices and inflationary pressure as import costs rise. Additionally, the Penn Wharton Budget Model as of April 8th projects that Trump’s tariffs would reduce GDP by about 8%! This doesn't look good.

Nonetheless, this trade dispute seems more like a way to challenge China, as the US had a trade deficit of $295 billion in 2024, up from $279 billion in 2023. On ‘Liberation Day’, tariffs on Chinese goods spiked to 54% and now reached as high as 145%, prompting immediate retaliation from China. In turn, China imposed tariffs as high as 125% on US exports and restricted key raw materials like rare earths, stating it would not respond to further tariffs as it no longer made economic sense.

Adding more complexity, the Trump administration temporarily exempted electronics such as smartphones, laptops, and PCs from the reciprocal tariffs (backing-down again?). However, Commerce Secretary Howard Lutnick warned that these exemptions are short-lived, citing future levies on semiconductors and other tech components due to national security concerns.

As you can tell, the current environment is uncertain and as long-term investors, we may find opportunities in cheaper valuations, but we must also acknowledge the challenges. Businesses are facing uncertainty, and global supply chains are under strain, which could impact profitability, growth prospects, and ultimately, stock prices. The stronger a company’s moat, the better its chances of weathering these turbulent times.

Without further ado, let's dive into our performance analysis and the rationale behind this quarter's transactions.

2. Portfolio Performance

As of March 31, 2025, our total return for YTD and Q1 2025 stood at -13%, lagging behind the S&P 500's quarterly return of -4.3%. The reason for the deviation is straightforward: only one stock in our portfolio posted positive returns, while two remained flat for the quarter. In contrast, the S&P 500 benefited from strong performers like Berkshire Hathaway, Philip Morris, ExxonMobil, Visa, and others.

Since inception (January 28, 2022), our cumulative return stands at 26.8% (annualized at 7.8%), compared to the S&P 500's cumulative return of 33% (annualized at 9.4%). However, we remain confident that this underperformance is temporary.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

3. Portfolio Insights

In our 2024 Portfolio Update, we introduced the following metrics to help evaluate the quality of our holdings and identify underperformers. We also explained the significance of each metric and outlined the minimum thresholds for our portfolio. You can refer to this article for explanations, as moving forward, we will comment on the progress.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

To begin with, our portfolio continues to meet the minimum quality criteria we set, so there's no need for a revamp, especially following the reallocation we made on March 14th (more on that later). Compared to the S&P 500, our portfolio’s profitability of 26.1%, and revenue and EPS growth of 9.6% and 13.2%, are in line with the index. Though, our weighted return on invested capital (ROIC) of 21% is slightly below the S&P 500, but it's a notable improvement from the previous quarter’s 19.4%, and more than sufficient to confirm portfolio quality.

On the valuation front, following our Q1 2025 decline of 13%, we believe the portfolio is well-positioned for upside. With an EV/EBITDA multiple of 15.8x and a free cash flow yield of 4.5%, we're in a stronger position than both the index and our prior quarter metrics. Analysts’ price targets also point to a 40.3% potential upside for our portfolio, versus 24.5% for the S&P 500, reinforcing our belief in future outperformance.

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Winners and losers

As of March 31, 2025, the portfolio consists of 19 stocks,

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Before diving into the details of the 2024 Portfolio Update, here’s a quick recap of the long-form articles we published this quarter—just in case you missed any!

1. Adobe: Is AI expected to kill the company or help it thrive?

2. Leslie's, Inc. (LESL): Swimming Against the Current - Buy the Dip?

3. Estee Lauder: New Leadership, Insider Buys, and a Brighter Future?

4. Google Cloud and Beyond: Can Alphabet’s $2 Trillion Valuation Soar Higher?

5. Mid-Cap Marvel: High Margins and Exceptional ROIC

6. Mid-Cap Marvel (Part 2): ATOSS Software

7. Champion Homes in a Rebounding Market ($SKY)

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1. Another Year Older, Even Wiser

In this year’s update, we want to highlight two key market events that stood out to us and then provide a broad forecast for 2025.

a. August 5th

On this day, the market took a sharp dive: the Dow Jones experienced its worst day in nearly two years, dropping 2.6%, while the S&P 500 fell by 3% and the Nasdaq by 3.4%. Fears of a recession, triggered by the July jobs report, led to a global sell-off. Yet, by the end of the month, the S&P 500’s total return was up 9.05% from its August 5th low.

Key lesson: Panicking is your worst enemy. Staying out of the market during such moments can cost you. Drawdowns are an inevitable part of investing, but history shows the stock market trends upward over the long term.

What we did (as communicated in the premium chat): On August 5th, we exited FactSet, trimmed Google, and freed up cash to deploy if volatility persisted (which we later put to work). Simultaneously, we added to Amazon and Adyen. Whether it was luck or not, our moves proved effective.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers —> annual StockOpine members can benefit from a 3-month Free Trial)

b. Elections (5th of November)

As shown in the chart below, cryptocurrencies experienced a meteoric rise in a short period following Trump’s election, attributed to perceptions of his pro-crypto stance. However, it’s important to acknowledge that what goes up can come down. The current market displays signs of euphoria, and it’s essential to approach what you see online with caution. What happens if Trump shifts his stance?

That said, can you make money in crypto? Absolutely! Allocating a small portion to cryptos in a diversified portfolio can make sense. However, you need to exercise caution and, at the very least, ensure you understand the risks involved (just our two cents, not financial advice!).

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers —> annual StockOpine members can benefit from a 3-month Free Trial)

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c. Expectations for 2025

We expect 2025 to continue as the ‘Year of AI’, but we anticipate that investors will demand tangible progress in monetization. Stocks that underperform could be harshly penalized, making it a year of separating winners from losers—though this remains a long-term game. We believe our portfolio, which includes a number of the big tech companies among others, is well-positioned for the year ahead.

AI also depends on managing costs, and energy consumption driven by computing power is a significant expense. As AI continues to grow, we can expect energy demands to rise, benefiting energy stocks. Nuclear power is an interesting energy source due to its high energy density and low carbon emissions, though safety concerns remain a challenge. It’s worth noting that Google is moving towards nuclear energy, joining other big tech companies in the shift.

Currently, StockOpine's portfolio is not focused on energy, as we consider it a commodity. However, we will examine energy opportunities in the year ahead to see if any align with our strategy.

Finally, there’s growing excitement around robotics, and Nvidia recently announced the Cosmos World Foundation model to advance "Physical AI." With autonomous vehicles in mind, we believe Google will continue to push forward with Waymo, expanding into more states and potentially leveraging its technological edge in other robotic applications.

Without further ado, let's dive into our performance analysis and the rationale behind this quarter's transactions.

2. Portfolio Performance

As of December 31, 2024, our total return for Q4 2024 was 1.5%, bringing our yearly return to 17.9%. This lagged the S&P 500's yearly return of 25%. It’s worth noting that the primary driver of our "underperformance" was not holding Nvidia, which contributed 5.6% to the S&P 500’s total return. Excluding Nvidia, the index would have returned 19.4%.

Since inception (January 28, 2022), our cumulative return is 45.7% (annualized at 13.7%), outperforming the S&P 500's cumulative return of 38.9% (annualized at 11.9%).

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

3. Portfolio Insights

From this update onward, we have decided to include additional key weighted metrics for our portfolio. These metrics will help us evaluate the quality of our holdings and identify underperformers. In the notes below the table, we briefly explain the importance of each metric and outline the minimum thresholds for our portfolio. While individual companies may occasionally fall below these thresholds due to short-term challenges, the overall portfolio should consistently exceed the minimum accepted ratios. If not, a significant portfolio revamp would be necessary.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis

Notes:

• EBIT Margin % (LTM): Indicates healthy profitability, suggesting efficient cost management and potential pricing power.

• ROIC (LTM): Measures the effectiveness of capital allocation, often reflecting strong competitive advantages.

• Estimated Revenue CAGR (3Y): Ensures that our portfolio is tilted toward companies with projected growth exceeding GDP over the next three years.

• FCF EV Yield (LTM): Highlights potential undervaluation (higher yields). Growth companies like big tech, which reinvest heavily, may show lower yields. However, this does not necessarily imply overvaluation, as growth itself holds intrinsic value.

• EV/EBITDA & Targeted Upside: These are informative metrics:

  • EV/EBITDA provides a sense of the portfolio’s overall valuation.

  • Targeted Upside reflects analysts' projections of stock potential but does not directly influence our decisions.

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As of December 30, 2024, the portfolio consists of 23 stocks,

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Before we delve into our Q3 2024 Portfolio Update, here's a list of the long-form articles we published during the quarter, just in case any slipped under your radar.

1. Adyen: Simplifying Payments with Top-Notch Quality

2. Autodesk: It’s all about execution

3. Diageo: Has the Share Price Reached the Bottom?

4. Airbnb: Bargain or Overpriced?

5. Rentokil Initial: A serial acquirer in the making

6. Unpacking PayPal: A Comprehensive Deep Dive into its Financials and Business (PART 2)

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Without further ado, let’s discuss what happened in Q3 and the rationale behind each transaction in our portfolio.

1. What’s moving the market

The July jobs report, published in August, showed an uptick in unemployment to 4.3%, which pushed the stock market down on 5th of August due to concerns of a ‘hard landing’. However, days later, inflation came in at 2.9%, the lowest level since 2021, easing investor fears.

The August jobs report added 28,000 more jobs compared to July, with unemployment stabilizing at 4.2%. Alongside a CPI report of 2.5%, lower than July's figure, led the Fed to cut rates by 50 bps for the first time since the COVID era, bringing renewed optimism to the market.

Source: CNBC

While September's CPI print came in at 2.4% year-over-year (slightly higher than expectations by 0.1%), and the nonfarm payroll report remained solid, the uptick in jobless claims to 258,000, hitting a 14-month high, adds some uncertainty to the market outlook. Reports suggest this surge could be tied to Hurricane Helene and the Boeing strike, so it may continue with Milton Hurricane.

Additionally, the drop in chip stocks, following the lower-than-expected orders of €2.6 billion versus the €5.4 billion expected for , and the downward revision of FY25 revenue forecasts by €5 billion, coupled with escalating geopolitical tensions, means it’s too early to declare victory. Nonetheless, we do believe that a diversified, high-quality stock portfolio is essential to navigate short-term uncertainty while compounding over the long term.

As for the China stimulus, while the political regime creates long-term uncertainty for Chinese stocks, many are trading at attractive valuations, offering potential short-term opportunities. Although our portfolio doesn’t have direct exposure to China, we do hold three stocks that generate a significant portion of their revenue from the region. These companies stand to benefit from the stimulus while adhering to the robust corporate governance standards of the US and EU.

2. Performance

As of September 30, 2024, our total return for Q3 2024 was 6.7%, with a year-to-date (“YTD”) return of 16.2%. This outperformed the S&P 500’s quarterly return of 5.9%, though it lagged behind its YTD return of 22.1%. Since inception (January 28, 2022), our cumulative return stands at 43.6% (annualized: 14.5%), compared to the S&P 500's return of 35.7% (annualized: 12.1%).

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

Let’s jump into the specifics.

2. Portfolio Summary

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Before we delve into our Q2 2024 Portfolio Update, here's a list of the long-form articles we published during the quarter, just in case any slipped under your radar.

1. Lululemon: Is the Brand's Power Really Fading?

2. The Adobe Advantage: Empowering Growth through AI

3. Meta Platforms: CAPEX, Efficiency, CAPEX…It never gets easy

4. PubMatic: Emerging as a Strong Contender in the SSP Market

5. Greggs’ Growth Strategy beyond the Sausage Roll

6. FactSet: Navigating Cyclical Headwinds and Positioning for Growth

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It’s worth mentioning that in Q2 2024, we also introduced Industry Overviews, which we plan to keep available for free subscribers, at least for the foreseeable future. The purpose of this additional article format is to narrow down potential investment candidates for our portfolio while also generating ideas for you.

Without further ado, let's discuss the economic outlook for the rest of 2024 and review our performance in Q2 2024.

1. What’s moving the market

As we mentioned in prior releases, we approach economic indicators with caution, as our focus remains on the fundamental strengths of the companies we hold. Nonetheless, we can't ignore broader economic trends.

In Q2 2024, several key developments occurred: the Swiss National Bank cut its rates for the second time this year, the Bank of Canada cut rates for the first time in four years, and the ECB also reduced rates for the first time in five years. Sweden followed suit, while the UK and US are taking a more conservative approach but are expected to cut rates in 2024. These actions indicate optimism that inflation is subsiding globally, providing some relief to firms strained by high rates.

The US economy has shown resilience, and the average US consumer seems to be doing well, highlighted by record-breaking Amazon Prime Day sales of $14.2 billion, up 11% year-over-year and US E-commerce retail sales which also increased by 8.6% year-on-year in Q1 2024 and 2.1% from Q4 2023. However, the housing market has felt the impact of higher rates, with existing home sales reaching a low of 3.89 million units in June 2024, a 5.4% decrease from the previous year.

Source: National Association of Realtors

Meanwhile, the commercial real estate market presents challenges that warrant close monitoring. Although the delinquency rate on commercial real estate loans remains at 1.18% as of Q1 2024, the value of delinquent loans has risen from $11.2 billion in 2022 to $24.3 billion in 2023, with recent estimates around $38 billion. With about $1 trillion in loans maturing in 2024 out of a total $4.7 trillion held by investors and lenders, it's crucial to carefully consider investments in REITs or banks. Here are some useful links for those looking into banks: 20 U.S. banks with the largest CRE loan volume, U.S. Banks With the Most Commercial Real Estate Exposure.

Despite mixed signals, the IMF projects global real GDP growth of 3.2% in 2024 and 3.3% in 2025, with Emerging and Developing Asia, including India and China, showing the most promising growth rates.

Source: International Monetary Fund

Overall, we see the economy moving in the right direction but remain cautious about the potential ripple effects of a spike in commercial real estate defaults if this risk materializes.

2. Performance

As of June 30, 2024, our total return for Q2 2024 was 0.7%, with a year-to-date (“YTD”) return of 8.8%. This is below the S&P 500's quarterly and YTD total returns of 4.3% and 15.3%, respectively. Since inception (January 28, 2022), our cumulative return stands at 34.5% (annualized: 13.0%), compared to the S&P 500's return of 28.1% (annualized: 10.8%).

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

A key factor contributing to our underperformance against the S&P 500 in 2024 is Nvidia, which we don't hold and which was responsible for about 35% of the total market returns. However, we are okay with this, as we believe our current portfolio is set for long term success.

2. Portfolio Summary

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Our primary aim is to streamline your research efforts through sharing our investing journey and analysis. Our value proposition revolves around identifying stocks that exhibit quality characteristics and trade at reasonable prices. When these two factors align, the margin of safety increases, and the likelihood of compounding expected future returns grows. While we continuously “turn over the most rocks” (sometimes the same ones), our transactions are limited each quarter as we are advocates of long-term investing.

As a result, you won't see us chasing after the latest market fad; rather, we prioritize stocks that stand the test of time. Following this philosophy, we can rest assured and observe our portfolio grow in line with our expectations (aiming for around 15% per annum).

Before we delve into the details of Q1 2024 Portfolio Update, here's a list of the long-form articles we published in the quarter. Just in case any slipped under your radar.

1. Booking Holdings: Unlocking Value Through the 'Connected Trip'

2. Paychex: Navigating Workforce Trends with Scale

3. Ashtead: Building Success Brick by Brick

4. Rentokil Initial: Potential Opportunity in Pest Control

5. Unraveling Amazon's Earnings: What You Need to Know - This is an earnings review (free) that we believe is worth a read.

6. Reckitt: Why Market Reaction Might Be Overblown

7. Raising a Toast: The Path to Profitability

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1. Performance

As of March 31, 2024, our total return for Q1 2024 was 8.1%, slightly below the S&P 500's total return of 10.6%. Since inception (January 28, 2022), our cumulative return stands at 33.6% (annualized - 14.3%), compared to the S&P 500's return of 22.9% (annualized - 10.0%).

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

2. Portfolio Summary

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Before we delve into the details of the 2023 Portfolio Update, here's a list of the long-form articles we published in the quarter. Just in case any slipped under your radar.

• Alphabet: Unveiling YouTube and Cloud Services

• Nemetschek's Transition to a Subscription-Based Model

• Evaluating the Strengths and Challenges of POOL Corporation

• Dissecting LVMH's Dynamic Presence in Luxury

• Evolution AB: Challenges, Regulations, and Market Dynamics

• Unveiling Estee Lauder: Performance, Challenges, and Future Prospects

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1. One year older, one year wiser

Quite the year, wouldn't you agree? Well, for most folks, it seemed to be an outstanding year. While a single year doesn't define future performance or abilities, rebounding from a -9.5% performance in 2022, reassures us that we're heading in the right direction.

Does this mean we nailed every decision? Far from it. Some stocks we covered in 2023 didn't make it to our portfolio but performed exceptionally well. On the other side, there were stocks that continued to slide, prompting us to increase our position, negatively impacting our overall (short-term) results. Nonetheless, we take ownership for our choices and the rationale behind each decision.

Take Evolution AB, for example. A solid company with a price exhibiting volatility, ultimately stabilizing at 2022 levels by the year-end. In our investment journey, guided by long-term horizon, volatility is our friend. Therefore, lower prices, given intact fundamentals and thesis, present an opportunity to accumulate funds in stocks where conviction remains.

However, always take this with a 'grain of salt.' If a stock persistently underperforms, ensure you understand why you might right and the market may be wrong. Taking a step back for self-reflection is always crucial. Nevertheless, the above examples and our total return for 2023 justify why you don't have to get everything right in your investment process. You can make mistakes but still perform well.

Now let’s turn to the importance of continuous learning. When we initiated this newsletter, our goal was to share our investment journey and research while simultaneously expanding our knowledge. Exploring various industries in 2023 not only allowed us to share valuable insights with you, potentially presenting a couple or more great investing ideas but also enriched our understanding of the world. As evident from our 2023 Yearly Recap, we delved into 17 new companies and revisited 6 of our existing portfolio companies. The longer we keep doing this, the greater the likelihood of discovering another solid fit for our portfolio. After all, in the words of Peter Lynch, “The person that turns over the most rocks wins the game.”

Without further delay, let's delve into our performance analysis and the rationale behind the transactions made during the quarter.

2. Performance

As of December 31, 2023, our total return for Q4 2023 and 2023 was 10.3% and 36.7%, respectively. This compares favorably to the S&P 500’s 2023 total return of 26.3%. Since inception (28 January 2022) our cumulative return stands at 23.6% compared to 11.1% of the S&P 500.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

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It’s been 3 months since we changed the format of one of the two company reports we publish each month and we are looking forward to your thoughts. How have you found it so far? Our feeling is that you do find them insightful, as we are approaching 2,700 subscribers and 100 supporters.

Here is a snapshot of the deep dives released over the quarter:

Deep dives of Q3 2023:

• Nasdaq Inc: A Diversified Financial Powerhouse

• Allegion: Turning Keys, Unlocking Future

• Reckitt: Brands, Transformation and Future Potential

New format:

• Decoding PayPal's Figures: Valuation and Growth Analysis

• Zoom: Assessment of Enterprise, Competition, and Valuation

• Skyline: On an acquisition spree

BONUS: Alphabet: Unveiling YouTube and Cloud Services

Without further delay, let's jump into the summary of our portfolio performance in Q3 2023 and Year to Date ("YTD") 2023. Admittedly, this was a particularly active quarter for us.

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1. A note on the economy

Geopolitical: Following nearly 20 months of the Russian-Ukraine conflict, a “new” crisis has emerged in the Middle East due to the surprise attack by Hamas on Israel. This newsletter refrains from delving into politics, but as investors we need to be aware of the potential escalation implications of the conflict in the region.

US economy: Per the latest data, US CPI increased by 0.4% in September on a seasonally adjusted basis, with a 3.7% increase over the past 12 months. Shelter costs, a significant household expenditure, have surged by 7.2% on a 12-month basis, while the energy index showed the most significant monthly increase at 2.3%. The reading was mixed surpassing consensus estimates of 3.6%. In the meantime, the US economy has showed resilience by adding 336,000 non-farm jobs in September, exceeding the consensus of 170,000, indicating that the US economy can function well at higher interest rates.

Global GDP forecasts: The IMF projects a 3% global real GDP growth for 2023, with the Emerging and Developing Asia region anticipated to be the fastest-growing, while the US is expected to achieve a 2.1% growth rate (exceeding the 1.5% average for Advanced Economies), suggesting that a recession is unlikely.

“As a result, projections are increasingly consistent with a “soft landing” scenario, bringing inflation down without a major downturn in activity, especially in the United States, where the forecast increase in unemployment is very modest, from 3.6 to 3.9 percent by 2025.” Pierre-Olivier Gourinchas, Economic Counsellor

Source: IMF World Economic Outlook, October 2023

2. Performance

As of September 30, 2023, our total return for Q3 2023 and YTD stood at 0.3% and 23.9%, respectively. This compares favorably to the S&P 500’s Q3 2023 return of -3.3% and YTD total return of 13.1%. Since inception (28 January 2022) our cumulative return stands at 12.1% compared to -0.5% of the S&P 500.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

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Before we discuss our performance and actions taken over the quarter we are glad to share with you three changes to our newsletter.

1. Up to now we were publishing two company write-ups per month covering new companies so as to generate ideas. Based on the feedback we received from the vast majority of our readers we came to the conclusion that a change is needed.

This is as follows: In the one report, we will cover an existing portfolio company diving into further details and providing an updated valuation, while the other report of each month will remain as it is. In our opinion, this approach resonates better with our long-term investment view for two reasons, a) constantly reevaluating existing stocks will allow us to fine tune our portfolio components and allocations and b) truly good ideas are hard to find so we better pick the best one for each month.

* As previously, free subscribers will receive a limited preview of each post

2. Investment thesis memos were previously published after initiating a new position. Although we do not provide investment advice, certain subscribers expressed their concerns of disclosing these transactions after their occurrence. Consequently, we will only initiate a new position after the investment thesis memo is released. It shall be noted, that for any additions to existing positions we will update you through our Quarterly Portfolio Updates.

* As previously, free subscribers will receive a limited preview of Quarterly Portfolio Updates but no preview of the Investment Thesis memos

3. Based on the newsletter’s structure, each paid subscriber will receive a valuation estimate of two companies each month (through the company write-ups). To keep things in order, on the last Friday of each month, we will provide to our paid supporters a table comparing price and estimated value of the stocks that were covered over the last 6 months.

Without further ado, here is a quick view on the deep dives we released over the quarter and the summary of our portfolio performance in Q2 2023 and 2023 Year to Date (“YTD”).

Deep dives of Q2 2023:

• Simple, successful and sustainable - Ferguson plc

• Riding the HVAC Industry tailwinds: An Investment Analysis of Watsco Inc.

• Cutting Through the Competition: Toro Company's Mow-tivating Journey

• Carrier: The Path to Becoming a Global Climate Champion

• Diageo - A Taste of Success in the Beverage Industry

• FactSet - Unleashing the Power of Data

1. A note on the economy

Per yesterday’s release, US Consumer Price Index (“CPI”) rose 3% in June 2023 compared to June 2022, displaying the lowest rate over the last two years. Consequently, Fed’s tightening policy through interest rate hikes is possibly coming closer to an end, yet few more hikes should be expected until the target of 2% is achieved. Looking at the core measure (excludes food and energy) the increase was 4.8%, the slowest in the last 18 months, yet above the target.

Moving to the global economy here is what the OECD expects as per its June 2023 Economic Outlook:

Source: OECD Economic Outlook, Volume 2023 Issue 1, Clare Lombardelli OECD Chief Economist

Below is a snapshot of OECD forecasts for the key economies.

Source: OECD Economic Outlook, Volume 2023 Issue 1

So what do we make of this? Uncertainty! As previously stated, we do not claim to be economists, however, we observe positive developments over the last months, while GDP forecasts across the globe imply that recession chances have declined. Nonetheless, we remain cautious for the remaining of 2023 as Big US banks are setting aside $7.6 billion for bad loans (per Quartz), double the amount of the prior year, a rather negative indication.

As StockOpine, we acknowledge that economic cycles are inevitable and our job is to select stocks that are aligned with our long term view, exhibiting resilient business models that will endure through tough times and prosper during euphoria times.

2. Performance

Our Q2 2023 and Year to Date (“YTD”) total return as of 30 June 2023 was 6.2% and 23.6%, respectively. This compares favorably to S&P 500 2023 YTD total return of 16.9% yet it is slightly lower than the Q2 2023 return of 8.7%. Since inception (28 January 2022) our cumulative return stands at 11.8% compared to 2.9% of the S&P 500.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

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The below is a summary of the performance of our portfolio for Q1 2023.

The composition of our portfolio is the outcome of the research we conduct under the StockOpine’s Newsletter, which we share with our subscribers through our in-depth reports.

Deep dives of Q1 2023:

• lululemon Athletica Inc. - It’s all about branding

• From Wood to Composite: Trex's Growth and Success in the Decking Industry

• Skyline Champion Corporation – A Compelling Investment Opportunity

• Beyond the Ecommerce Behemoth: Examining Amazon's Diverse Business Ventures

• Walmart Inc. – Harnessing the Power of Omnichannel Retailing

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1. A note on the economy

While we do not claim to be economists, we wanted to share some of our thoughts for the upcoming year.

With the rising interest rates to compact inflation, the ongoing layoffs, the geopolitical tensions and the financial industry turbulence, we anticipate another challenging year rather than a healthy macro environment for 2023. Thankfully, recession is not here yet and a soft-landing scenario appears more possible.

As shown in the screenshot below, the International Monetary Fund ("IMF") projects a more prominent slowdown in advanced economies like the US and the Euro Area.

Source: IMF, April 2023 World Economic Outlook

If you are interested to read more about the global economic outlook here is the link to the Overview of IMF, April 2023 World Economic Outlook report. Do spend 10 minutes to read the Foreword and the Executive Summary.

Although the macro environment is crucial and can impact our forecasts or even the timing of opening a position, our investment strategy is long term oriented. We strive to select stocks with resilient business models that can sustain economic cycles.

2. Performance

Our Q1 2023 and Year to Date (“YTD”) total return as of 31 Mar 2023 was 16.3% compared to 7.5% of S&P 500. As a result of the Q1 2023 performance, our return since inception (28 January 2022) turned positive to 5.2% compared to a negative 5.4% of the S&P 500 over the same period.

Source: S&P Dow Jones Indices, Broker, StockOpine analysis

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The below is a summary of the performance of our portfolio during Q4 2022 and Calendar Year 2022. We initiated our portfolio on 28 January 2022.

What you should know before reading our quarterly portfolio update?

• Our portfolio is just shared for transparency purposes. This is not a financial or an investment advice. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

• Past performance is not indicative of future returns.

1. Performance

Our yearly 2022 total return as of 31 December 2022 was negative 9.54% whereas the Q4 2022 return was 1.83%.

Although we did better than the market in 2022, our portfolio traded in the negative territory. As of 31 Dec 2022, S&P 500 fell by 19.44%.

2. Portfolio Summary

The portfolio as of 31 December 2022, consists of 12 stocks with and being the largest positions with an allocation of 8.4% and 7.7%, respectively. which is our smallest position accounts for less than 2% and is considered a tracking position.

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During the latest quarter, we deployed more cash reducing cash allocation from c.61.5% to c.43.7% due to the addition of three stocks ($NVS, $EVO.ST and $POOL) and due to an increase in existing positions ( , , and ). Given the recent increase in and holdings, these are no longer considered as tracking positions.

The best performing stocks in our portfolio were Greggs Plc and KLA Corporation with a gain of 28.0% and 18.0%, respectively. The worst performing stocks were PayPal Holdings and Alphabet, down by 45.1% and 29.3%, respectively.

Source: Broker, StockOpine analysis

Source: Broker, StockOpine analysis

3. Portfolio movements in Q4 2022

Why did we buy the new stocks?

1. Novartis AG – Novartis operates in an industry with high barriers of entry and we believe that its potential transition into a pure-play innovative medicine company, its focus on 5 key therapeutic areas as well as its strong pipeline of blockbuster drugs, makes Novartis a strong candidate for high returns.

   Biggest risk– Weakness in patent validity resulting to early entry of Generics and/or Biosimilars.

   Write up: Novartis AG - Write up

2. Evolution AB – Operating in a highly fragmented market, yet EVO is the undisputable leader in Live Casino solutions with superior margins and returns on capital compared to peers. Given the total addressable market and its strong relationships with key gaming providers we believe that Evolution can be a long term winner.

   Biggest risk – EVO or its clients not keeping up with complex and inconsistent regulations across jurisdictions.

   Write up: Evolution AB – A ‘sin’ stock with healthy returns

3. Pool Corporation – POOL is a leader in a relatively consolidated industry with a fragmented consumer base and strong track record of execution. Its scale provides POOL with significant competitive advantages, evident by market share gains and operating margin improvement over the years.

   Biggest risk – Tighten monetary policy impacting discretionary spending (new construction and refurbishment).

   Write up: Pool Corporation - Write up

Why did we add to existing positions?

1. Airbnb – The leader in alternative accommodation buzzled investors with its Q4’22 outlook resulting to a drop in price. Nothing appeared to be a thesis breaker from the Q3’22 earnings announcement. Macro environment can impact results in the short run, however, the business model remains strong with improved profitability and upside from potential recovery in the APAC region.

   Most recent memo: Airbnb - Earnings Review Q3’22

2. Meta Platforms – Following Q3’22 earnings announcement, price per share declined below $100, therefore, we decided to increase our position as we do not think that investments in Reality Labs come at all costs. This was also justified by the November layoffs.

   Most recent memo: META – Can it go lower, or did we hit a bottom?

3. KLA Corporation – When the new export rules to China were introduced by US in October (KLA’s sales to China exceed 25% of its Revenue) price per share fell at $260 levels. Given its appealing valuation and considering benefits from CHIPS Act and other secular growth factors (AI, 5G, Electric Vehicles etc.) impacting KLA, we decided to increase our stake.

   Write up: Deep Dive KLA Part 1 & Part 2

4. Autodesk – Autodesk is the leader in CAD (Computer Aided Design) software with high switching costs and strong pricing power. In the past quarters, there were no surprises with the company and the recent pullback in its stock price offered us the opportunity to add to our position at prices that we believe are more in line with the intrinsic value of the business.

   Write up: Autodesk - Deep Dive

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Please note that we may have more write ups for each stock than the ones shared above. If you are interested to read more just check our page.

Thank you for reading our newsletter and for being a subscriber!

You can also find us at Commonstock and on Twitter @StockOpine.

Source of data and methodology

• Portfolio allocation is provided by our broker.

• YTD Performance is provided by our broker and is measured using the time weighted rate of return (“TWR”) which eliminates the distorting effects on growth created by inflows / outflows. Take a time to read this Investopedia - Definition.

• Quarterly performance is calculated by us using the monthly TWR provided by our broker.

• S&P 500 performance is obtained from Yahoo Finance.

Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward-looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

This post may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

The below is a summary of the performance of our portfolio during Q3 2022 and Year to Date (“YTD”) as of 30 September 2022.

We initiated our portfolio on 28 January 2022.

1. Introduction

What should you expect from our quarterly portfolio update?

• Our portfolio allocation as provided from our broker.

• Information on new or increased positions and shares sold.

• Performance on a YTD basis as provided by our broker. Our broker currently uses the time weighted rate of return (“TWR”) which eliminates the distorting effects on growth created by inflows / outflows. Take a time to read this Investopedia - Definition.

• Quarterly performance calculated by us using the monthly TWR provided by our broker.

• A comparison of YTD performance relative to S&P 500 as provided by Yahoo Finance.

• A brief explanation for each transaction that took place in the latest quarter.

What should you know before reading our quarterly portfolio update?

• Our portfolio is just shared for transparency purposes. This is not a financial or an investment advice. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

• Past performance is not indicative of future returns.

2. Performance

Our YTD total return as of 30 Sept 2022 stands at a negative 11.2%, whereas the Q3 return for 2022 stands at a negative 1.98%.

During the first 9 months of 2022 we did better than the market, however our portfolio still trades on the negative territory. As of 30 Sept 2022, S&P 500 fell by 24.8%.

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3. Portfolio Summary

The portfolio as of 30 September 2022, consists of 9 stocks with and being the largest positions with an allocation of 9.2% and 6.6%, respectively. On the other hand, , and account for less than 2% each and are considered as tracking positions.

During the latest quarter the cash allocation was reduced from c. 67.7% to c. 61.5% due to the addition of two more stocks ($ZM and $GRG.L) and due to an increase in existing positions when there was a pullback in price ($GOOGL, and ).

$META together with are the worst performing stocks, down by 29.8% and 33.7%, respectively, whereas the best performing stocks were $ABNB and $ADSK with a gain of 11.5% and 7.4%, respectively.

Source: Broker, StockOpine analysis

Source: Broker, StockOpine analysis       

4. Portfolio movements in Q3 2022

Why did we buy the new stocks?

1. Greggs Plc – Strong competitive positioning in a fragmented market, expectations to grow number of stores and revenue per store as they tap on evening trade and delivery as well as valuation.

   Write up: Greggs Plc - Investment thesis

2. Zoom Video Communications – Growth of net dollar expansion rate for Enterprise customers and optionality through Zoom Phone and contact center. In the post shared on Sept 14, 2022 we stated that we will not initiate a position at $79. As the price fell even further, we decided to open a tracking position on Sept 22, 2022 at $75.

   Write up: Zoom - Snapshot

Why did we add to existing positions?

Our conviction (shown below) did not change, and price movements gave us an opportunity to reduce our cost base.

1. Alphabet – Strong network of the Search Engine business and of YouTube and the continued momentum in Google cloud growth.

   Write up: Alphabet - Snapshot

2. Booking Holdings – Leader in OTA market, expected rebound in the travel industry, optionality (flights, rent a car, experience etc.) and valuation.

   Write up: Commonstock Competition Booking

3. KLA Corporation – Leader in the Semiconductor Metrology and Inspection equipment (4x nearest competitor), WFE market expectations, CAPEX plans of the big players (Intel, TSM and Samsung) and high returns on capital employed.

   Write up: Deep Dive KLA Part 1 & Part 2

Please note that we may have more write ups for each stock than the ones shared above. If you are interested to read more just check our page.

You can also find us at Commonstock and on Twitter @StockOpine.

Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward-looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

This post may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.